D. Sampath Kumar, Hyd, Hyderabad V. ITO, Ward-9(1), Hyd, Hyderabad

ITA 96/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6334 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: B SHANTI KUMAR
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT ITA NO.96/HYD/2016 : ASSESSMENT YEARS 2011-12 SHRI D.SAMPATH KUMAR, HYDERABAD (PAN AJXPD 7967 M) V/S INCOME TAX OFFICER WARD 9(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.SHANTI KUMAR RESPONDENT BY : SHRI B.KURMI NAIDU DR DATE OF HEARING 15.6.2016 DATE OF PRONOUNCEMENT 15.7.2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) VII, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2, ASSESSEE IS ENGAGED IN PURCHASE AND SALE OF OLD CARS; IN MOST OF THE CASES, CARS ARE PURCHASED ON BEHALF OF INTENDING BUYER AND THE ASSESSEE EARNED MERE COMMISSION, WHEREAS IN FEW CASES WHEN THE CAR IS AVAILABLE AT A GOOD PRICE, ASSESSEE PURCHASE S THE SAME AND SELLS IT TO AN INTENDING BUYER AT A HIGHER PRICE, THE DIF FERENTIAL AMOUNT BEING THE PROFIT THEREON, WHICH WAS TREATED AS COMMISSION RECEIVED IN THE DEAL. FOR THE YEAR UNDER CONSIDERATION, THE ASSESS EE ADMITTED TOTAL INCOME OF RS.2,52,490 AFTER CLAIMING DEDUCTIONS UND ER CHAPTER VIA. THE CASE HAVING BEEN TAKEN UP FOR SCRUTINY THE ASSE SSING OFFICER SOUGHT TO SERVE THE NOTICE ON THE ASSESSEE THROUGH HIS INSPECTOR AT THE ADDRESS GIVEN BY THE ASSESSEE. SINCE THE NOTICE COULD NOT BE SERVED, THE SAME WAS AFFIXED ON THE DOOR. EVEN THE SUMMONS ISSUED ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 2 THEREAFTER COULD NOT BE SERVED ON THE ASSESSEE. UPO N ENQUIRY, THE INSPECTOR REPORTED THAT THE ASSESSEE WAS NOT RESIDI NG AT THE ADDRESS AVAILABLE ON RECORD, AND THE ASSESSEE SHIFTED FROM THE LAST KNOWN ADDRESS AND HIS PRESENT WHEREABOUTS ARE NOT KNOWN. THEREFORE, THE ASSESSING OFFICER HAD NO ALTERNATIVE EXCEPT TO COMP LETE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT AS PER S.14 4 OF THE ACT. 3. ON PERUSAL OF THE AIR DATA OF THE ASSESSEE FO R THE RELEVANT FINANCIAL YEAR, IT WAS FOUND THAT THE ASSESSEE MAD E CASH DEPOSITS AGGREGATING TO RS.40,67,300 IN THE SAVINGS ACCOUNT MAINTAINED WITH AXIS BANK, TARANAKA BRANCH. THE ASSESSEE COULD NOT FURNISH THE SOURCE OF CASH DEPOSITS MADE INTO THE SAID BANK ACC OUNT, AND THEREFORE, THE SAME WAS TREATED AS UNEXPLAINED INCO ME AND ACCORDINGLY ADDED THE SAME UNDER S.68 OF THE ACT. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A ) THAT THE ADDITION MADE UNDER S.68 IS BAD IN LAW. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED STATEMENT OF AC COUNT OF THE BANK ACCOUNT WITH AXIS BANK, PROFIT & LOSS ACCOUNT AND T HE BALANCE SHEET FOR THE RELEVANT PERIOD, TO CONTEND THAT THE ASSESS EE IS DEALING IN USED CARS AND THE AMOUNT DEPOSITED IN THE BANK ACCOUNT WAS THE AMOUNT RECEIVED FROM THE PARTIES/INTENDING BUYERS OF CARS. THE LEARNED CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER . ON VERIFICATION OF THE ACCOUNT COPY, THE ASSESSING OFFICER NOTICED THA T THE CLOSING BALANCE AS ON 31.3.2011 IS RS.11,02,657, AND THE TO TAL CASH BALANCE/CASH IN HAND AND CASH AT BANK IS ONLY RS.65 ,240, AS PER THE INFORMATION AVAILABLE IN THE RETURN OF INCOME. THER EFORE, THE DIFFERENCE AMOUNT OF RS.10,37,417 REMAINS UNEXPLAINED AND HAS TO BE TAXED. HE ALSO OBSERVED THAT THE ASSESSEE RECEIVED TOTAL INT EREST OF RS.20,573 ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 3 DURING THE FINANCIAL YEAR UNDER CONSIDERATION, WHE REAS HE HAS OFFERED ONLY RS.14,624 IN THE COMPUTATION OF INCOME AND THE REFORE, THE BALANCE AMOUNT OF RS.5,949 NEEDS TO BE TAXED 5. IN THE WRITTEN SUBMISSIONS, THE AUTHORISED REP RESENTATIVE OF THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFI CER THAT THE CASH DEPOSITS HAD TO BE WITHDRAWN WHEN THE TRANSACTIONS COULD NOT MATERIALISE AND RELIED UPON SALES TURNOVER OF RS.43 ,86,970 DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT FOR THE Y EAR ENDED ON 31.3.2011. IN THIS REGARD, THE ASSESSING OFFICER, I N HIS REMAND REPORT, OBSERVED THAT THE ASSESSEE PREPARED ITS FINAL ACCOU NTS WITHOUT CONSIDERING THE TRANSACTIONS REFLECTED AT RS.74,11, 872, AND HE HAS NOT CONSIDERED THE TRANSACTIONS REFLECTED IN HIS BANK A CCOUNT. 6. WHEN A COPY OF THE REMAND REPORT WAS FURNISHED TO THE ASSESSEE, LEARNED COUNSEL SUBMITTED BEFORE THE CIT( A) THAT THE SELLERS PUT THEIR CARS AT ASSESSEES PREMISES, WHICH WOULD NOT BE SHOWN AS STOCK-IN TRADE. SIMILARLY, THE PROSPECTIVE BUYERS GIVE ADVANCES INTENDED TO BE PAID TO CAR OWNERS TOWARDS SALE CONS IDERATION. THESE ADVANCES ARE ALSO NOT SHOWN AS HIS MONEY. THUS, THE ADVANCES SO RECEIVED AND DEPOSITED IN BANK WERE NEVER SHOWN AS INCOME. THIS IS BECAUSE THE ASSESSEE CANNOT RECEIVE ADVANCE WHEN HE DOES NOT OWN THE CARS, AND THIS HAS RESULTED IN DIFFERENCE BETWE EN THE BANK BALANCE AND BALANCE AS PER BOOKS. WITH REGARD TO INTEREST A MOUNT OF RS.5,949, THE ASSESSEE ADMITTED THAT THIS WAS AN OVERSIGHT. A S REGARDS THE DEPOSITS MADE IN THE BANK ACCOUNT, THE ASSESSEE CON TENDED THAT THE TOTAL CREDITS ARE ADVANCES FROM PROSPECTIVE BUYERS OF USED CARS, AND INTENDED TO BE PAID TO CAR OWNERS ON FINALIZED DEA LS OR AT THE TIME OF REGISTRATION OF THE VEHICLE. THESE CREDITS INCLUDED CASH DEPOSITS OF ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 4 RS.74,11,872. THE TOTAL FINALISED SALE TRANSACTIONS AMOUNTED TO RS.43,86,970. WHICH IS ALSO SHOWN AS ASSESSEES TUR NOVER, AND AFTER DEDUCTING EXPENDITURE, I.E. COST PLUS OTHER EXPEND ITURE, THE BALANCE OF RS.5,01,869 IS SHOWN AS PROFIT. IT WAS THUS CONTEN DED THAT THE ASSESSING OFFICERS OBSERVATION THAT THE ACCOUNTS A RE FINALISED WITHOUT TAKING INTO ACCOUNT CORRECT BANK BALANCE IS ERRONEO US. HE ALSO SUBMITTED A REVISED SET OF FINAL ACCOUNTS WHEREIN I T WAS STATED THAT THE ASSESSEE IS MERELY A FACILITATOR OF SALE AND PURCHA SE OF USED CARS AND HE EARNS INCOME ONLY IN THE FORM OF COMMISSION. TH EREFORE, ALL THE IMPUGNED TRANSACTIONS IN THE BANK ACCOUNT ARE THE B USINESS TURNOVER AND ONLY COMMISSION IS EARNED FROM THE BUSINESS. TH E SAME HAS ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME; HEN CE, ADVANCE RECEIVED BUT NOT DISCLOSED IN ACCOUNTS SHOULD NOT B E TAKEN INTO CONSIDERATION. 7. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE/DETAILS WITH REGARD TO ITS BUS INESS, I.E. REGARDING THE SOURCE OF ALLEGED CASH DEPOSITS IN BANK ACCOUNT MAINTAINED BY HIM. SINCE THE ASSESSEE CONTENDED THAT ALL THE IMP UGNED TRANSACTIONS IN THE BANK REPRESENTS BUSINESS TURNOVER, LEARNED C IT(A) CHOSE TO ESTIMATE THE INCOME INSTEAD OF MAKING A SEPARATE A DDITION UNDER S.68 OF THE ACT. IN HIS OPINION, SINCE THE ASSESSEE HAS DECLARED INCOME AGAINST TURNOVER OF RS.43,86,970, THE BALANCE TURNO VER WHICH IS NOT REFLECTED IN THE PROFIT & LOSS ACCOUNT OF RS.30,24, 902 SHOULD BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ESTIMATING TH E INCOME. SINCE THE ASSESSEE HAS ALREADY CLAIMED EXPENDITURE, THE CIT(A ) ESTIMATED INCOME AT 20% OF THE UNREPORTED TURNOVER. SIMILARL Y, AS REGARDS THE DIFFERENCE IN THE BALANCE IN THE BANK ACCOUNT, VIZ. BETWEEN THE ACTUAL BALANCE AND BALANCE AS SHOWN IN THE BOOKS OF ACCOU NT, THE LEARNED ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 5 CIT(A) OBSERVED THAT THE SAME DESERVES TO BE TREATE D AS UNEXPLAINED CREDIT AND ADDITION ON THIS ACCOUNT IS MAINTAINABLE . HE THUS CONFIRMED THE ADDITION OF RS.10,37,417 ON THIS ACCOUNT. 8. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 9. THE LEARNED COUNSEL SUBMITTED THAT THE CIT(A) E RRED IN ESTIMATING THE COMMISSION INCOME AT 20% OF TURNOVER IN SECOND HAND CARS BUSINESS, RESULTING IN ADDITION OF RS.6,04,980 AND ALSO ERRED IN HOLDING THAT AN AMOUNT OF RS.10,37,417 HAS TO BE TR EATED AS UNEXPLAINED CREDIT. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN ESTIM ATING THE COMMISSION INCOME AT 20% OF TURNOVER, SINCE THE NORMAL PROFIT RANGES BETWEEN 10 TO 15% IN THIS LINE OF BUSINESS. HE ALSO SUBMIT TED THAT THE CIT(A) ESTIMATED THE COMMISSION INCOME AT 20% OF THE DIFFE RENTIAL TURNOVER OVERLOOKING THE FACT THAT THE ASSESSEE IS NOT SELLI NG SECOND HAND CARS DIRECTLY, BUT HE IS ONLY FACILITATOR OF SALE AND PU RCHASE OF THE USED CARS ON COMMISSION BASIS. AS REGARDS THE DIFFERENTIAL AM OUNT IN THE BANK BALANCE, IT WAS CONTENDED THAT THE BOOK RESULTS HAV ING BEEN REJECTED AND INCOME ESTIMATED AT 20%, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING INDEPENDENT ADDITIONS. 10. LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASS ESSING OFFICER REJECTED THE BOOKS RESULTS IN THE PROCEEDIN GS UNDER S.144 OF THE ACT AND ESTIMATED THE INCOME IN WHICH EVENT, SE PARATE ADDITION UNDER S.68 COULD NOT HAVE BEEN MADE. HE ALSO SUBM ITTED THAT ESTIMATION OF INCOME AT 20% ON THE ADDITIONAL TURNO VER IS BAD IN LAW IN AS MUCH INCOME IN THIS LINE OF BUSINESS IS VERY MAR GINAL RANGING ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 6 AROUND 10%. HE THUS SUBMITTED THAT THE ADDITIONS C ONFIRMED BY THE LEARNED CIT(A) ARE NOT IN ACCORDANCE WITH LAW. 11. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INCOME AS SHOWN BY T HE ASSESSEE AS PER THE BOOKS OF ACCOUNT WAS TAKEN INTO CONSIDERATI ON AND HENCE IT IS NOT A CASE WHERE THE BROOK RESULTS WERE REJECTED IN WHICH EVENT SEPARATE ADDITION UNDER S.68 IS NOT MAINTAINABLE. HE ALSO SUBMITTED THAT THE DIFFERENTIAL TURNOVER WAS TAKEN INTO CONSI DERATION BY THE LEARNED CIT(A) AND THE EXPENDITURE, IF ANY, HAVIN G ALREADY BEEN DEBITED TO PROFIT & LOSS ACCOUNT, THE TAX AUTHORIT IES WERE JUSTIFIED IN ESTIMATING THE INCOME AT 20% OF THE DIFFERENTIAL TU RNOVER. 12. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IT IS WELL SETTLED THAT EVEN W HERE INCOME IS ESTIMATED BY THE ASSESSING OFFICER, STATUTORY ALLOW ANCES OR DISALLOWANCES SHOULD BE CONSIDERED INDEPENDENTLY. IN THE INSTANT CASE, THERE IS A DIFFERENCE BETWEEN THE ACTUAL BAN K BALANCE AND THE BALANCE SHOWN BY THE ASSESSEE IN WHICH EVENT ADDITI ON MADE BY THE ASSESSING OFFICER UNDER S.68 OF THE ACT VIS-A-IS TH E DIFFERENTIAL AMOUNT IS JUSTIFIED AND I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ACCOUNT. HOWEVER, AS REGARDS THE COMMISSION I NCOME ON DIFFERENTIAL TURNOVER, I AM OF THE OPINION THAT THE ESTIMATION OF COMMISSION AT 20% OF THE TURNOVER IS ON THE HIGH SI DE CONSIDERING THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF PURCHA SE AND SALE OF CARS AS COMMISSION AGENT/AS A FACILATATOR. I DEEM IT FA IR AND REASONABLE TO ESTIMATE THE INCOME AT 15% OF THE DISPUTED TURNOVER WHICH WOULD MEET THE ENDS OF JUSTICE. I ORDER ACCORDINGLY. ITA NO.96/HYD/2016 SHRI D.SAMPATH KUMAR, HYDERABAD 7 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 15 JULY, 2016. SD/- (D.MANMOHAN) VICE PRESIDENT DT/- 15 TH JULY, 2016 COPY FORWARDED TO: 1. SHRI D.SAMPATH KUMAR, C/O. SHRI B.SHANTHI KUMAR, AD VOCATE, 111, TARAMANDAL COMPLEX, 5-9-13, SAIFABAD, HYDERABA D 2. 3 INCOME TAX OFFICER WARD 9 ( 1 ), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) 7, HYDERABAD 4. PR. COMMISSIONER OF INCOME - TAX 7 , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.